Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition

-(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (b), the long-run equilibrium will result in:
A) economic profits = 0.
B) accounting profits = 0.
C) a tangency of the ATC curve with the MR curve.
D) A and C.

Question

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition
 
-(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (b), the long-run equilibrium will result in:
A) economic profits = 0. 
B) accounting profits = 0. 
C) a tangency of the ATC curve with the MR curve. 
D) A and C.

Quizplus · Accepted Answer

In the long-run equilibrium of monopolistic competition, firms earn zero economic profits due to the entry of new firms, which drives down prices and profits until only normal profits remain.

Use the Following for Questions 22-31